D) a firm in perfect competition. They collude and agree to share the market equally. C) there are numerous producers of two goods competing in a competitive market The total market demand is P(Q) = 50 - 2Q, where Q is the total quantity produced by all (active) firms in the industry. A) Strategic Independence b) Its demand curve is downward-sloping A) Each firm has an incentive to collude. East Asian regimes tend to have similar characteristics First they are orien. Pure (Perfect) Competition 2. How are profitability and risk impacted by changes in the current liabilities to total assets ratio? 0. a) Cartel B) revenues, elasticity, profit, and payoffs. A market is considered to be a(n) ______ when the largest four firms in an industry control more than 40% or more of the market. c) dominant firms Advertising can persuade consumers to pay higher prices for products that are well _____ (one word) instead of purchasing unadvertised products with lower prices. While adopting the leaders price, if firm B supplies less amount than XB which needs to maintain the equilibrium price, the leader will push to a non-profit maximizing position. Have you a question about something that I covered. 9) In the dominant firm model of oligopoly, the dominant firm faces a EconTips 2022 - All Right Reserved, Designed and Developed by Harshasoft, Perfect Competition: Definition, Graphs, short run, long run, Monopoly Price discrimination: Types, Degrees, Graphs, Examples, Monopolistic Competition Equilibrium| Long-run| Short-run. Chapter 15: Monopolistic Competition and Olig, Pesticide Applicator Certification Core Manual, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal. The factors that determine a market structure include the number of businesses, control over prices, and barriers to market entry. The labor productivity at this plant is known to have been 0.100.100.10 vans per labor-hour during that month. D) There is more than one firm in the industry. They do it strategically so they do not lose their customers in what could be a price war. D. 2021. b) Strategies are chosen for a single time period. The main Characteristics of oligopoly are as follows: A few sellers There will be a few sellers in an oligopoly. Your email address will not be published. Which is the simple form of oligopoly market? If Marilyn believes that the $10 million stock issue was undertaken only to improve DTRs b) Localized markets E) other firms will not raise theirs. . 5) According to the kinked demand curve theory of oligopoly, each firm believes that if it raises its price, from a social viewpoint, monopolistic competition is better than perfect competition None of these Question 8 (1 point) A firm using advertising differs from a firm not using advertising in that the firm using advertising. *To obtain lower input prices d) Firms choose strategies at the same time. Marilyn D) perfectly inelastic. D) the four-firm concentration ratio for the industry is small. 2003-2023 Chegg Inc. All rights reserved. Due to minimal competition, each of them influences the rest through their actions and decisions. C) firms in monopolistic competition. a) gentleman's agreement In an oligopoly, dominant market players are influential enough to decide on the price of products and services. d) Oligopolistic collusion, Compared to monopolies, oligopolies ______. So when an oligopolist decreases prices to increase output, others follow the path. xxx\underline{\phantom{\text{xxx}}}xxx. 21) It is difficult to maintain a cartel for a long period of time. A) "Gas prices in this town always go up and down together." D) 2,750. These firms are large enough that their quantity influences the price and so impacts their rivals. C. The choices made by one firm have a significant effect on other firms. 6) Wal-Mart follows the kinked demand curve model of oligopoly. These data are as follows: 30.334.531.130.933.731.933.131.130.032.734.430.134.631.632.432.831.030.230.232.831.130.733.134.431.032.230.932.134.230.730.730.730.630.233.436.830.231.530.135.730.530.630.231.430.730.637.930.334.130.4\begin{array}{lllll}30.3 & 34.5 & 31.1 & 30.9 & 33.7 \\ 31.9 & 33.1 & 31.1 & 30.0 & 32.7 \\ 34.4 & 30.1 & 34.6 & 31.6 & 32.4 \\ 32.8 & 31.0 & 30.2 & 30.2 & 32.8 \\ 31.1 & 30.7 & 33.1 & 34.4 & 31.0 \\ 32.2 & 30.9 & 32.1 & 34.2 & 30.7 \\ 30.7 & 30.7 & 30.6 & 30.2 & 33.4 \\ 36.8 & 30.2 & 31.5 & 30.1 & 35.7 \\ 30.5 & 30.6 & 30.2 & 31.4 & 30.7 \\ 30.6 & 37.9 & 30.3 & 34.1 & 30.4\end{array} It is a reflection of quantity/output performance against cost/revenue performance. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." *manipulating consumer preferences. d) is always kinked *It helps reduce demand for material products. B) there are two producers of two goods competing in an oligopoly market Cost of firm A is lower than firm B Profit maximizing price and quantity of firm A is PA and XA respectively. Greater the number of firms, the higher the degree of interdependence. *Prohibit the entry of new rivals. D) increase the amount they produce. A Computer Science portal for geeks. c) By changing pricing strategies D) Bob denies and Art confesses. e) may be no more efficient due to a lack of firm interdependence, c) may be less desirable because they are not regulated by government to protect consumers. B) in a single-play game but not a repeated game. C) 2. 1) A cartel is a group of firms which agree to Products traded or traded homogeneously become the second characteristic of oligopoly. When firm X increases its price. O D. Some barriers to entry. Principles of Microeconomics Instructor: Sandhya Patlolla Assignment 7 1) In two firm oligopoly, if one firm increases its price, then the other firm can: A. B) "Every time Sparrow's Donuts has a donut sale, so does Tim Horton's." 0. Here, they focus on each other and try to exceed customer expectations in every possible way. A monopoly occurs when. Lets identify the oligarchy before identifying the characteristics of an oligopoly. They believe in making customers stick to their brands for core competenciesCore CompetenciesThe core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. b) flexible c) Affect costs and influence the supply of rival firms The most important model of oligopoly is the Cournot model or the model of quantity competition. C) equilibrium price will be sensitive to small cost changes but quantity will not. This represents what kind of problem with the four-firm concentration ratio? d) The advertising model, To reduce uncertainty or increase profits, oligopolists may change their prices ______. What are three models used to study pricing and output by oligopolies? d) achieve greater allocative efficiency but lesser productive efficiency, c) give the appearance of increased competition Which of the following is not a characteristic of oligopoly? If this game is nonrepeated, the Nash equilibrium is A) both firms cheat on the agreement. E) A and C. 8) A merger is unlikely to be approved if ________. One of theoligopoly characteristicsis the focus of its members on improving the product quality or offering benefits to make their brand unique. marginal cost pricing The joining of firms that are producing or selling a similar product is a horizontal merger Suppose an industry has total sales of $25 million per year. a) increasing firm profits b) Collusive pricing model The urban land lease policy is not very friendly to rural households land in general and the poor land holders in particular. . c) its rivals match a price increase but ignore a price cut b) Interindustry competition 2) In the dominant firm model of oligopoly, the larger firm acts like corporations president in exchange for some land just before the negotiations with lenders began. B) raise the price of their products. b) They try to avoid losses by raising prices in conjunction with rival firms. c) They move leftward and upward to a higher point on the average-total-cost curve. read more, market demand, and product differentiationProduct DifferentiationProduct differentiation refers to making a product look attractive and different from other products in the same class. c. Competing firms can enter the industry easily. When two major players dominate a sector, the market becomes a duopolyDuopolyWhen there are two market leaders in any industry or service, this is referred to as a duopoly. D) Dr. Smith advertises only if Dr. Jones advertises. Each firm is so large that its actions affect market conditions. D) "I have been spending extra on research and development of my new two-way widget." Businesses or firms operating across a broad range of industries like the airline industry, electrical industry, automobile industry, wireless telecommunication services, petroleum industry, smartphone industry, steel industry, supermarkets, the tobacco industry, and railroads industry are commonly considered oligopolistic in different jurisdictions. Why is collusion desirable to oligopolistic firms? A) a firm in an oligopoly market. ratio. What are the 4 characteristics of oligopoly? a) inelastic 8) 8)Which is not a characteristic of oligopoly? d) cost leadership. Gentleman's agreements are a type of covert collusion, occurring in social settings where a product's _____ is agreed upon and market shares are determined by _____ competition. d) price changes are often difficult to match A) a market where three dominant firms collude to decide the profit-maximizing price. a) Affect profits and influence the profits of rival firms Characteristics of an oligopoly The market has been shared equally by firms A and B The cost of firm A is lower than firm B Profit maximizing the output of firms A is XA and the price is PA Firm B adopts this price and sells XB (=XA) amount. *interindustry competition *It enhances competition and reduces monopoly power. c) Nash equilibrium 14) The kinked demand curve model b) greater than or equal to 50% All firms stick to what has been decided, thereby ensuring price stability in the sector. d) It will always be U-shaped. E) potential entrants taking all the business away from existing firms. Barriers to entry. d) The market contains a few large producers. B) unit elastic. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. A small number of sellers. C) the HHI for the industry is small. Firms in anoligopoly marketfocus on non-price competition and less innovation but ensure their brands are uniquely identifiable. what are the 5 characteristics of an oligopoly? This has been a Guide to Oligopoly and its definition. d) easier. B) it prevents or substantially lessens competition The financial sector refers to businesses, firms, banks, and institutions providing financial services and supporting the economy. For example, when a government grants a patent for an invention to one firm, it may create a monopoly. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly. c) it will prevent a price war That is, the firm is myopic or short sighted not to learn from its past mistakes and take d 1 d'1, as if it will not shift. Firms in the industry make price and output decisions with an eye to the decisions and policies of other firms in the industry. View full document. A duopoly is E) the firms are interdependent. It is the most important feature of an oligopolistic market. b) depends on the firm's cost structure C) perfectly elastic. a) They move downward and to the right to a lower operating point on the average-total-cost curve. C) rules, strategies, profit, and outcome. *To obtain lower input prices c) costs; uncertainty; increase An oligopoly in economics refers to a market structure comprising multiple big companies that dominate a particular sector through restrictive trade practices, such as collusion and market sharing. 12) Because an oligopoly has a small number of firms d. 2. . The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. Course Hero is not sponsored or endorsed by any college or university. An oligopoly is a market structure where a few large firms collude and dominate a particular market segment. And that is what turns out to be the unique selling proposition (USP) of the respective brands in the oligopolistic industry. Besides, high capital requirements, licensing, patents, market demand, economies of scale, limit-pricing, and customer loyalty restrict the entry of new businesses. A) "I am producing extra widgets, even though it costs me short-run profits, to stop Wally's Widgets from expanding into my market." It thus limits the competition to only those already in the group. a) Firms have no control over their price. C) Firms in the cartel will want to raise the price. The market share of the firms is unequal. c) All oligopolists' or imperfect competitors' demand curves are down-sloping because they are price makers. *Prohibit the entry of new rivals, *Reduce uncertainty In doing so, they reduce production and increase prices, a phenomenon called collusion. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. Therefore, necessarily they tend to react. Also, they rely on free-market forces to earn higher profits than a competitive market. It is an essential component of marketing strategy leading to brand recognition and business growth. Increasing returns to scale is a term that describes an industry in which the rate of increase in output is higher than the rate of increase in inputs. 26) Refer to Table 15.3.4. 4) Which one of the following industries is the best example of an oligopoly? *increasing sales and output On the other hand, if an oligopolist reduces output by raising prices, the rest refrain from doing so. A) all members of the cartel have a strong incentive to abide by the agreed-upon price. Artificial intelligence (AI) services are on the rise, with every industry readying to integrate the technology sooner or later. E) is not; frequently one of the smaller firms becomes the dominant firm, and the original dominant firm becomes less important. If so, then the firm's demand curve will be ______. b) strengthens The first firm to move in a sequential game has an advantage by establishing a ____ _____ that is favorable to them. Oligopolists do not compete with each other. a) Demand is highly elastic below the going price c) price leadership; cartel d. Monopolistic Competition 4. B) monopolists. D) specify how average cost is determined. B) interdependence of firms. Firm A and Firm B are the only producers of soap powder. In the scenario above, the market is. b) through pricing Oligopolists in an oligopolisticmarket structure agree not to raise their prices but match only price cuts to avoid price rigidity. Impure oligopoly - have a differentiated product. When there are two firms, the market structure is called duopoly, The number of buyers will be quite large as in other market models, If the products of all firms are homogeneous, then it is called , If the products are differentiated, then it is called , The nature of products of the firms is crucial in making price and output decisions. 1. a) The possibility of price wars diminishes and profits are maximized. 41) Refer to Table 15.3.12. C) the same as a monopoly. *Increase profits What are the 4 characteristics of oligopoly? E) None of the above. Patent rights or accessibility to technology may exclude potential competitors. 11) Which one of the following quotations best describes a dominant firm oligopoly? Share with Email, opens mail client *It lowers search costs of information for consumers. Features: Many and small sellers, so that no one can affect the market C)The sales of one firm will not have a significant effect on other firms. As a result, monopolists produce less, at a higher average cost, and charge a higher price than would a combination of firms in a perfectly competitive industry. The more concentrated a market is, the more likely it is to be oligopolistic. East Asian regimes tend to have similar characteristics First they are orien. D) Consumers will eventually decide not to buy the cartel's output. E) none of the above is done. So here we can see a one-way interdependence pattern. *localized markets, Barriers to entry into an oligopoly most resemble those of a ______. E) Each firm has an incentive to cheat. We reviewed their content and use your feedback to keep the quality high. The firms in the oligopolistic market are having full knowledge about the market particularly about their rival firms. b. A) potential entrants entering and making monopoly profit. What does a demand curve look like for an oligopolistic firm? 5) A market with a dominant firm and with weak barriers to entry ________ in long-run equilibrium because ________. Here we discuss how does Oligopoly market work in economics along with its characteristics. An oligopoly exists when a market is dominated by a small number of suppliers or firms. a) collusion; cartel That is, the large firm acts independently. D) There is more than one firm in the industry. It is one of the four market situations, including perfect competitionPerfect CompetitionPerfect competition is a market in which there are a large number of buyers and sellers, all of whom initiate the buying and selling mechanism. C) average variable cost curve is discontinuous. The firms comprise an oligopolistic market, making it possible for already-existing smaller businesses to operate in a market dominated by a few. A) kinked demand curve. That means higher the price, lower the demand. But the other firms act considering the interdependence. issued for the land? d) game theory. Why does a rise in the current asset to total asset ratio result in a decline in net working capital's estimate of both profits and risk? Perfect competition is a market in which there are a large number of buyers and sellers, all of whom initiate the buying and selling mechanism. Market players in an oligopolistic market focus on non-price competition, ensure their brands are uniquely identifiable and apply hidden advertising tactics. Which of the following is characteristic of oligopoly, but not of monopolistic competition? d) Cost leadership model E) none of the above. A) Each firm faces a downward-sloping demand curve. Firm 1 cost function is TC (9) = 20 + 12q + q, while firm 2 cost function is TC (9) = 50 +8q2 + q . a) The same as monopolistic competition d) through advertising a) are monopolies e) through cartels, c) through product development b) Firms may sell a homogeneous product. B) total revenue. Because of their large size and minimal competition, each firm in an oligopoly market structure influences the others. c) An outcome in the payoff matrix from which neither firm wants to deviate since the current strategy is optimal given the rival's strategic choice. If productivity can be increased to $0.11 vans per labor hour, how many hours would the average laborer work that month? B) other firms will lower theirs. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. *The game would eventually end in the Nash equilibrium (cell B or C). b) Mutual interdependence Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation. *Preemptive pricing a. If a firm assumes that its rivals will match all price changes, but the firm's rivals actually charge a lower price what are the potential consequences? c) high to receive a payout of $12 9) If the efficient scale of production only allows three firms to supply a market, the market is a, 10) A cartel is a group of firms that agree to. E) only when there is no Nash equilibrium. Prisoners' dilemma describes a case where Select one: O a. there are a few firms that are mutually interdependent O b. when one firm in an oligopoly raises its price, other firms will follow O c. firms may collude in order to act like a monopoly O d. barriers to entry exist to limit the entrance of new firms Without collusion, if a firm incorrectly assumes that its rivals will charge the same price but its rivals actually charge a lower price, the firm's demand curve will shift to the ____. In short,AI oligopoly is all set to shape the market, comprising a few large AI service providers dominating and influencing others in the business. Our model focuses on the interactions of these banks within an imperfectly competitive loan market and the endogenous determination of equilibrium loan quantities for banks within each group, the total equilibrium amount in . For example, it has been found out that insulin and the electrical industry are highly oligopolist in the US. 8) Firm X is competing in an oligopolistic industry. c) The possibility of price wars increases, but profits are maximized. e) Price leadership model, In the _______ model of oligopoly, firms react to price decreases but ignore price increases by other firms. as the price increases, demand decreases keeping all other things equal. Strategic independence. *The game would eventually end in the Nash equilibrium (cell A). If the products of the firms are differentiated the degree of interdependence is then weakened. Oligopoly is a market structure characterized by a few firms.
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